Examination of Witnesses (Questions 160
TUESDAY 29 JANUARY 2002
160. If the Government goes forward with analogue
switch-off that will give an enormous dividend to you, will it
not, because you have a monopoly in large areas of the country
on digital television?
(Mr Ball) Yes, we have nearly 100 per cent coverage,
absolutely right; satellite has nearly 100 per cent coverage.
161. So you are in favour of an early date for
(Mr Ball) I am ambivalent.
162. I cannot understand why you would be ambivalent
if the likelihood is that the Government is effectively giving
you literally millions of clients.
(Mr Ball) That is nonsense. They are not giving us
millions of clients, are they? You can address those areas by
satellite, but I am not necessarily selling my pay services into
those areas. If the only way to get those services into areas
which cannot be covered by DTT or cable is indeed satellite, the
free-to-airs exist on satellite, I do not have a benefit from
those free-to-air channels. There is no economic benefit to Sky.
There is an opportunity, I grant you, that you may be able to
sell those customers up into other services, but there is no guarantee.
163. Presumably that then is why, because there
is no incentive to you to advertise the free-to-air offer which
exists and this has now stopped, has it not?
(Mr Ball) The free-to-air offer is there, but we charge
for the box now.
164. When did that start, beginning of December
(Mr Ball) I think it started at the beginning of January.
165. I went into Dixon's the other day to check
about where advertising has got for even the basic package. When
I took out the basic package it was £7 and then two days
later I got a letter from Sky saying it was going up to £10.
(Mr Ball) You would have waited a year for that price
166. Yes, but I ended up paying it a year later.
Dixon's could not advise me of the basic package being available
at all. They said that there is no basic package available.
(Mr Ball) That is really a question for the retailers,
not for me. There are 30 channels available free-to-air on Sky.
167. All the material which is provided through
Dixon's and all the others comes from you. It is your marketing
material and the basic package is not listed.
(Mr Ball) Indeed; absolutely right. I am in business
to sell Sky channels on the Sky platform. The Sky platform carries
free-to-air which is great and it adds to the variety, but clearly
I am going to spend my subscriber acquisition budget on acquiring
people who take Sky services. That is exactly why I am in business.
168. If vertical integration of the platform
and the channels is one of your major economic advantages.
(Mr Ball) I do not think I said that. Did I just say
169. You just said that your aim was to get
more people to watch Sky channels by virtue of having the platform.
(Mr Ball) Yes. They watch Sky. I am very for people
watching Sky channels on other platforms.
170. That was not the point you just made.
(Mr Ball) Okay.
171. Let us look at the area where vertical
integration obviously is potentially a problem and I do not know
whether it genuinely is or it is just potentially one, and that
is in the rate card. I was not quite sure from what you were saying
earlier whether OFTEL has specifically approved the prices on
the rate card.
(Mr Ball) There are several rate cards. I think you
are mixing rate cards. The rate card OFTEL approves is the rate
card for conditional access.
172. That is exactly the one I am referring
to, the SSSL managed one. Have the prices there been specifically
approved by OFTEL?
(Ms Cassells) OFTEL regulates a published rate card
which actually sets a ceiling on the prices. We then go off and
make negotiated agreements with the channel providers. We have
185 such agreements. There has only been a complaint about one.
Even on the basis of that one complaint, the price which was negotiated
was considerably less than the published rate card price. OFTEL
does not actively intervene in every price negotiation. That would
be very intrusive regulation.
173. So the price that Sky pays for Sky One
for instance is not an approved price by OFTEL.
(Ms Cassells) It is a price which is agreed on an
arm's-length basis within Sky and set according to fair, reasonable
and non-discriminatory terms.
174. Under that rate card you have mentioned,
the SSSL rate card, how much does BSkyB pay for conditional access
for a Premium Sport subscriber or a Sport subscriber and how many
channels does that mean you are able to get to that Sport subscriber?
(Ms Cassells) That is not information we have to hand.
I am sure we can write to you about it later, if that would be
175. Would there be any difference? How much
would ITV pay for conditional access for a Sport subscriber and
how many channels would they get in return for that?
(Ms Cassells) That largely depends on whether ITV
wishes to retail ITV Sport itself or wishes it to be retailed
by Sky. This is information we can come back to you with; we do
not have it with us.
176. Presumably if there is a difference between
those two, then that would show that there is not such a thing
as fair, open and non-discriminatory access under the vertical
integration which BSkyB and SSSL have and that you are therefore
(Ms Cassells) No, you have to be quite careful about
the use of the term discrimination which is actually about applying
different terms to similar people in similar circumstances. The
circumstances can vary quite easily from one channel to another
so many factors go into the negotiation. I just re-iterate. We
have 185 agreements. Anyone can complain to OFTEL. There has been
one complaint. ITV can go to OFTEL in respect of ITV Sport if
it wishes. It may do so after it has reached a negotiated price,
as was the case with ITV1.
177. You have been very successful with what
is obviously a very committed but aggressive approach to building
up your business. All of us recognise that and particularly the
scale of your penetration. One of the things which concerns me
about the paper you have submitted is that you avoid completely
what is probably the central issue in the Government's proposal
and that is the whole question of ownership. Do you accept that
there is a fairly sizeable selection, at least of the political
population, which would be very concerned about any major expansion
in your company's operations, for example to terrestrial television
or deeper into radio broadcasting?
(Mr Ball) No, I do not accept that.
178. What are your views on how the whole issue
of ownership should be approached.
(Mr Ball) It should be governed by competition law.
179. Do you think that would be sufficient protection?
(Mr Ball) Yes, in my view.